Five 8-10% Yielders That Can Actually Grow Your Portfolio, Too!

Brett Owens, Chief Investment Strategist
Updated: April 7, 2017

Many investors think they need to choose between current income and price upside. They don’t.

In a moment, I’ll highlight five stocks paying between 8% and 10% with 40% upside to boot.

Let’s face it – growth matters. It’s the best way to retire on a nest egg of just $500,000:

How to Stretch Your Investment on $500,000

The table above assumes a nest egg of half a million dollars that yields 8% a year, and absolutely no dividend reinvestment – here, you’re putting every cent of income into your pocket. Look how much that $500,000 expands over just a few years as you’re able to achieve more capital gains out of it. Even if you’re conservative and want to assume just 4% in annual growth out of your portfolio, that’s an extra $240,000 after 10 years – a much better position to be in than if you settled for a no-growth portfolio by selecting subpar high yielders

Sure, many companies that start to mature begin plying income investors with higher and higher dividends to support their shares, and everyone in that equation resigns themselves to low (or even no!) growth. But a number of super-high-yielding companies still have excellent growth prospects for the years ahead, and by piling into these double-threat dividend stocks, you can achieve annual total returns that climb well into double digits.

Here’s are five stocks yielding between 8.2% and 9.8% that analysts also believe will deliver profit growth in the years to come.

TCP Capital (TCPC)
Dividend Yield: 8.2%

TCP Capital (TCPC) is a business development company that targets midsized firms, typically between $100 million and $1.5 billion in enterprise value – some of which the company admits include “complex situations requiring specialized industry knowledge.” In other words, not every investment TCP makes is a no-doubt, low-maintenance winner. That’s OK, though, because while TCP will on occasion provide deals that include equity or mezzanine debt, 95% of TCP’s portfolio is senior secured debt.

TCP Capital’s portfolio is also extremely diversified, with the company offering a meticulous breakdown of its industry, including “Utility System Construction,” “Building Equipment Contractors” and “Lessors of Nonfinancial Licenses.”

TCPC, like most BDCs, took its lumps from 2014 through the start of 2016, but operationally speaking, there’s a lot to like. Total investment income has grown uninterrupted for years; 2016’s $148 million was nearly triple 2012’s figure. Better yet, that figure is expected to increase roughly 10% annually for the next couple of years, and Wall Street projects roughly 4% annual earnings growth for the next half-decade.

That in turn should help power TCPC back to 2014 highs and beyond, complementing the stock’s 8%-plus yield.

TCP Capital (TCPC) Is Back on Track

Hercules Capital (HTGC)
Dividend Yield: 8.2%

Hercules Capital (HTGC) shows once again why interest rate hikes aren’t always bad news for BDCs and other high-yield investments. In fact, management just explained to investors that a 25-cent increase to the prime rate will add 2 cents per share to annual net investment income.

Hercules boasts that it’s the “largest non-bank lender to venture capital-backed companies at all stages of development,” and its portfolio includes hundreds of companies across industries such as clean technology, surgical devices and enterprise software.

The company recorded record net investment income of $100.3 million in 2016, and analysts expect the good times should at a roughly 5% annual growth clip over the next few years.

Plus, you don’t have to sweat the Fed.

Hercules Capital (HTGC) Runs With the Fed

Compass Diversified Holdings (CODI)
Dividend Yield: 8.7%

Compass Diversified Holdings (CODI) isn’t a business development company, but it gets that a lot – so much so that it actually dedicates space in its Investors FAQ area to dispelling that notion!

Instead, CODI simply gobbles up controlling interests in companies, typically targeting companies in North America that range between $75 million and $500 million in EV and offer stable operating cash flows of at least $10 million annually.

Its holding companies are all over the map – from Clean Earth, a provider of environmental services for contaminated materials, to Arnold Magnetic Technologies, which manufactures engineered magnetic solutions for the aerospace and energy sectors, among others. CODI has been wheeling and dealing lately, too, with its Clean Earth subsidiary acquiring AERC Recycling Solutions at the end of March, and Compass finishing its divestiture of Fox Factory earlier in the month.

Compass pays a 36-cent quarterly dividend like clockwork that equates to a high-8% yield currently. Better still, Wall Street sees five-year annual earnings growth coming in at 7%. That should help CODI shares tick higher while the payout does the heavy total return lifting.

Compass (CODI) Isn’t a BDC, But It Pays Like One!

Fidus Investment Corp (FDUS)
Dividend Yield: 8.8%

We return to the BDC theme with Fidus Investment Corp (FDUS). While Fidus invests in senior secured debt and equity, it primarily deals with mezzanine debt. Moreover, it deals in “lower middle market companies,” which it defines as companies that sport annual revenues between $10 million and $150 million.

Necessarily, FDUS does so with a strong eye toward risk management.

Fidus had a particularly active fourth quarter in which it invested a record $934 million and closed on seven new portfolio investments. But net asset value per common share grew from $15.17 in full-year 2015 to $15.76 in 2016, and net investment income ticked higher, too. Analysts see a robust 8% improvement to the bottom line this year before it slows to a still respectable 3% moving forward. That should help push FDUS shares higher while you collect nearly 9% in annual income.

Fidus Investment (FDUS) Continues to Manage Its Risk Well

Apollo Commercial Real Estate Finance (ARI)
Dividend Yield: 9.8%

Last, and most, is Apollo Commercial Real Estate Finance (ARI), a mortgage REIT (mREIT) externally managed by an Apollo Global Management LLC (APO) indirect subsidiary. It invests in various real estate-related debt investments – mostly split between subordinate loans (53%) and first mortgage loans (42%) at the moment, with 5% in commercial mortgage-backed securities.

ARI is as diversified as it gets from a real estate perspective, with “for sale” residential taking up the biggest chunk at 24%. Still, there are double-digit holdings in retail and hotel properties, and significant single-digit chunks in multifamily residential, industrial, healthcare and mixed-use real estate.

Apollo is delivering not just operational growth, with net interest income up 40% last year alone, but dividend growth after years of stagnation – a long-time 40-cent quarterly dividend was hiked to 44 cents in 2015, then again to 46 cents. Analysts see modest bottom-line growth from here, but the bar is slightly lower here given the excellent yield of nearly 10%.

Apollo Commercial Real Estate Finance (ARI) Delivers Monster Total Returns

The Retirement Portfolio You NEVER Have to Touch!

High dividends and the potential for capital gains are two of the biggest drivers of the ultimate retirement portfolio. I like these five stocks for their potential on both fronts.

However, they do feature a couple of weak spots that investors need to monitor. The growth prospects admittedly are a little on the sparse side in some cases, and you’ll also notice that many of these picks are missing growth of another kind – in the dividend itself.

You’ll find no such gaps in my “No Withdrawal” retirement portfolio.

A growing nest egg is great, and so is high, stable retirement income. But if you want to throw together a total dividend portfolio, you’ll need big yields, the potential for capital gains AND constantly improving payouts. After all, you’ll need to keep up with inflation, and a portfolio that doles out steadily more income ensures that your retirement is only more comfortable and secure as it goes on.

But those kinds of “triple-tool” dividend stocks are difficult to find. Believe me! I’ve spent months researching hundreds of companies for the ultimate dividend plays, and after weeding out numerous yield traps and value traps, I’ve compiled the ultimate “No Withdrawal” portfolio. These picks offer …

  • No-doubt 6%, 7% even 8% yields – and in a couple of cases, double-digit dividends!
  • The potential for 7% to 15% in annual capital gains
  • Robust dividend growth that will keep up with (and beat) inflation

That means you can live off dividend income alone without ever touching your nest egg – but if disaster strikes and you need to dip in, that’s OK, because you’ve grown your retirement account with these double-whammy dynamos.

This all-star portfolio features the very best of several high-income assets, from preferred stocks to REITs to closed-end funds and more. That means diversification and continued payouts regardless of how volatile or bearish the stock market becomes.

You deserve more than a retirement spent scraping by on meager blue-chip returns and your Social Security checks. You deserve big, regular dividend checks that will let you see the world and live in comfort for the rest of your post-career life.

Let me show you the path to a no-worry retirement. Click here and I’ll provide you with THREE special reports that show you the path to building a “No Withdrawal” portfolio. You’ll get the names, tickers, buy prices and full analysis of their wealth-building potential – and it’s absolutely FREE!